The Fed faces risk from multiple directions and is experiencing a high level of uncertainty. Our baseline scenario sees the hawks mostly unchanged and the doves to consolidate towards two cuts for 2025.
So far, the labor market has taken the slowdown in labor demand in the healthiest way possible. If the labor market slows more than expected, the Fed may not have the luxury of patience anymore.
A light week of Fedspeak this week, with little new revelations.
As tariff policy starts to be implemented, the Committee seems to be coalescing on a view that they'd like to look through tariffs if they result in a one-off increase in prices, but are concerned about the possibility of long-term expectations becoming unanchored.
